Results: Searching for 'Electric power conversion'

A review funded by HubNet and UKERC, and written by the University of Strathclyde's Damien Frame, Keith Bell and Stephen McArthur, argues that RD&D activity by Britains electricity distribution network operators has significantly revived; this revival is linked to Ofgem's 500m Low Carbon Network Fund investment.

The principal aims of this paper are to examine the range of reported unit costs for major generating technologies, show the range of estimates, explain where possible the reasons for the range, and show to what extent there is any clustering around central values. In addition, the paper explains the components of unit cost calculations and discussed what is, and is not, included in these calculations.

• Energy balancing is critical and extends beyond the electricity system
• Numerous opportunities to achieve balancing include:
  • Energy storage
  • Demand side flexibility
  • Vector integration
• Key decisions that lead to new energy systems will affect how much and what type of flexibility is needed.
• There is a huge amount of potential that we do not currently understand about balancing within a whole energy system.
• It is possible to assess the requirements for future flexibility – tools and evidence are being developed to help with this.

We welcome the opportunity to comment on the findings of the Cost of Energy Review, conducted by Professor Dieter Helm. In our response, we address most of the questions set out in the Call for Evidence from BEIS. Before turning to these specific questions, we have three general observations about the Review and the Call for Evidence.

First, whilst the review title focuses on the cost of energy, this is misleading. The terms of reference and the Review report make it clear that the main focus is electricity rather than energy in general.

This distinction is important since the data shows significant differences in the position of UK electricity and gas costs when compared to costs in other countries. There are also differences between relative costs for households and relative costs for business energy consumers. UK electricity prices are higher up the European league table than prices for gas. Electricity prices for energy intensive industries in the UK are particularly high.

Our second comment is that there are important distinctions between prices, costs and bills. Whilst much of the debate focuses on prices, the costs of energy for consumers also depends on their energy consumption. Therefore, it is also important to consider energy efficiency of buildings, appliances and industrial processes since these are a key determinant of costs.

Our third comment is that costs need to be considered for the electricity system as a whole. Whilst the separate questions in the Call for Evidence about generation, networks and retail supply are understandable, costs to consumers partly depend on interactions between these components of the electricity system. This compartmentalised approach to the evidence base could mean that some of these systemic interactions are missed.

Overview

A series of energy policy changes announced since the May election have led to concerns about increasing political risk faced by prospective investors in the UK energy system (ECCC 2015). It has also been suggested that policy needs to be ‘reset’, with less technology-specific intervention and increased resources for longer term research into new technologies (Helm 2015). This paper draws on a large body of analysis from UK Energy Research Centre (UKERC) and Imperial College.

The paper argues that a ‘reset’ approach is unnecessary, will create delays to investment, increase political risks, and hence costs to consumers. Simply put, the government already has the levers it needs to encourage investment in a secure and lower carbon system. Policy can be made more effective by providing investors with greater clarity and a longer term perspective, using the policy framework that is already in place. Auctions for Contracts for Difference (CfDs) have already brought forward significant reductions in the prices paid to low carbon generators. CfDs could be moved progressively to a technology neutral basis, combined with price caps to bear down further on costs.

The paper discusses the infrastructure implications of new sources of energy and notes that government will need to balance the benefits of technology neutral CfD auctions against the need to develop strategic infrastructure in a timely fashion. It also discusses the impacts of variable renewables and explains that whilst it is important for system costs to be allocated cost effectively this does not mean that variable generators should be obliged to self-balance and invest in dedicated back up.

The paper also explains that whilst greater investment in innovation would be welcome, forthcoming research shows the timescales associated with invention, demonstration and deployment of technology are long. Whilst improvements to technologies are hugely important, the emergence of entirely new technologies remains very uncertain. Support for innovation should not be premised on wishful thinking about silver bullet technologies. Many of the technologies we need to decarbonise already exist and have done so for several decades. The challenge is to drive costs down and encourage network innovation to better suit new sources of power.

Finally, the paper argues that whilst more effective carbon pricing would bring many benefits it is not a sufficient condition for significant energy system change. Regulation iv UK Energy Research Centre of emissions from existing coal fired power stations after 2025 would aid investor clarity and improve the prospects for investment in both low carbon and gas-fired generation.

The paper first discusses estimates of the levelised costs of selected technologies and the corresponding rates of return under alternative assumptions as to prices. It then shows how such estimates can be refined to allow for the variability of demand, changes in plant dispatching schedules, storage and so forth. Next it considers the effects of environmental policies and innovation on costs and the rate of return. Finally it considers the issues posed by uncertainty and risks. By beginning with the simple cases of levelised costs and average returns, and then by gradually peeling away assumptions, the aim is to gradually reveal the fundamentally different perspective that arises when the rate of return becomes the focus of investment.

The meeting considered both the general shape of the Electricity Market Reform (EMR) package and the four specific elements proposed in the Department for Energy and Climate Change (DECC) and HM Treasury (HMT) consultations. This summary covers first the generic aspects and then, more briefly, the four specific elements.

This report is an account of the discussion; comments are nonattributed. Opinions expressed in the report do not necessarily represent UKERC’s views. Arrangements for the meeting were facilitated by the UKERC Meeting Place.

• Low cost heat networks
• The use of syn-gas generated from EfW technologies to create fuels / chemicals 
• The use of pyrolysis to create transport fuels 
• The injection of bio-gas and syn-gas from EfW technologies into the gas grid 
• The injection of bio-gas and syn-gas from EfW technologies into the gas grid with CCS

• Applying forecast values for low to high waste availability and conversion efficiencies, the amount of useful energy from waste (both heat and power) which may be generated ranges from 5 to 230TWhrs.
• Projected achievable electrical generation is approximately 25TWhrs per year
• This equates to between 5% and 8% of the UK?s electricity demand
• For each of the technology and waste arisings scenarios, the deployment of advanced energy from waste technologies is projected to contribute to a net decrease in UK CO₂e emissions of between 5 and 10 MTCO₂e/year at midpoint technology conversion and waste arisings scenarios
• Greater emissions reductions are associated with high total conversion efficiency technologies, both to electricity and from utilising heat.

• The Technology Evaluation Criteria to allow the technologies assessed within the project to be compared;
• The financial modelling approach and key assumptions for the calculation of the benefits; and
• The definition of the existing market and baseline technologies to compare against the proposed optimisation and improvements.

• A - Summary of Work Packages
• D - Modelling user manual for WP4
• E - Task 4.1 Project framework deliverable
• F - Technology development opportunities for EfW
• G - Pre-treatment and gas cleaning
• H - Summary of technology readiness for use with wastes

• Biogas cleaning and compression (for gas grid or vehicle use) for Medium Scale AD plant applications generating around 300kW and 1500 kW of biogas (Type 2) applications
• Multi-stage AD plant for Type 2 applications
• Thermo-chemical pre-treatment of wastes to increase biodegradability of feedstock
• Single stageAD plant for dairy farms (Type 3)

• Single stage AD technology is relatively inefficient with respect to semi-solid waste, but will continue to be applied, with some modification, as it provides greater flexibility when feedstocks are prone to change from season to season or even daily.
• Multi-phase AD provides greater energy yield, but is relatively more costly (tankage, quality of digestate, high level of control etc).
• Pre-hydrolysis involving the use of chemicals or enzymes may prove too costly (the digestate will require different handling) to reach financial viability, but it will be important to keep abreast of the development with second and third generation biofuels, which look more promising.
• Hydrolysis of the hemicellulose and cellulose fractions of ligno-cellulosic materials is still at the development stage, although there are plans for demonstrations in the EU and USA. It is not clear whether this should be a priority for the UK at present, since the same feedstock could potentially be used in more efficient thermal processes such as gasification and pyrolysis.

1. The opportunity for Energy from Waste in the UK
2. Makes recommendations regarding Technology Development Opportunities needed to take advantage of the opportunities identified.

• WP1: UK Waste arisings
• WP2: Technology Assessment
• WP3: System Modelling

• Distributed scale advanced thermal integrated systems for wastes
• Cost effective gasification gas clean-up, in accordance with a system solution
• Low cost, high efficiency distributed scale integrated AD systems
• Integrated distributed energy from waste facilities incorporating: thermal and AD technologies to maximise resource efficiency.

This working paper analyses the environmental sustainability of four electricity production systems that include carbon dioxide capture and storage (CCS):

• Pulverised coal (PC)
• Pulverised coal with oxyfuel combustion (PCOC)
• Natural gas combined cycle (NGCC), and
• Integrated gasification combined cycle (IGCC)

The analysis is based largely on a review of relevant Life Cycle Assessments (LCAs). Thus it considers the environmental sustainability of the entire electricity generation chain from fuel extraction through electricity generation and CO2capture to CO2 storage.

A multi-time period combined gas and electricity network optimisation model was developed. The optimisation model takes into account the varying nature of gas flows, network support facilities such as gas storage and the power ramping characteristics of electricity generation units. The combined optimisation is performed from an economic viewpoint, minimising the costs associated with gas supplies, linepack management, gas storage operation, electricity generation and load shedding. It is demonstrated on two case studies, a simple example, and on the GB network.

This response provides recommendations on the reform of the energy supply market, based on research on “energy retail market governance” undertaken within UKERC.

• Overall, we recommend that reform of the retail energy market should not be considered in independence from the work on ‘systems flexibility’, energy transitions, ‘whole systems’, network charging reform and wholesale market policy.
• We recommend that the evaluation of energy retail market success should explicitly include an assessment of its compatibility with a low-carbon transition. Specifically, the retail market should allow for long-term investment recovery in low-carbon solutions .
• We also provide an overview of approaches to organising default energy commodity supply in some US energy retail competition states.
• We suggest that Ofgem (and Government) consider improving the potential for intermediaries and assess the likely implications of resale of commodity energy by a wider range of eligible players, subject to customer protection requirements.

This report considers the role and importance of electricity cost estimates and the methodologies employed to forecast future costs. It examines the conceptual and empirical basis for the expectation that costs will reduce over time, explains the main cost forecasting methodologies, and analyses their strengths, limitations and difficulties. It considers six case study technologies in order to derive both technology specific and generic conclusions about the tools and techniques used to project future electricity generation costs.

• Vehicle electrification
• Users and Vehicles
• Energy supply
• Project aims
• Project structure
• Modelling framework
• Narratives (scenarios)
• Stage 1 initial analysis
• Stage 1 research with consumers
• Stage 1 research with fleets
• Stage 2

• Substantial challenges associated with widespread roll-out of low carbon vehicles; shift from a “problem for the network” to an “opportunity through integration of vehicles as part of a wider system” can yield benefits for all actors in the system, including:
  • increased uptake of low-emission vehicles, managing charging and refuelling, and optimising the system design
• Analysis and solutions must be holistic (considering all parts of the system together, including users)
• Robust trials in Stage 2 will generate data to test solutions and inform analysis, and will add unique value:
• Trial with mass-market users (i.e. people from the majority of the vehicle user and fleet operator markets)
• Addressing widely-applicable plug-in vehicles (BEVsand PHEVs) suitable for wide range of users
• Holistic system design

This Consultation Response to the House of Lords Science and Technology Committee Inquiry into the resilience of electricity infrastructure.In this response we discuss whether theUKs electricity system is resilient to peaks in consumer demand and sudden shocks, andhow the costs and benefits of investing in electricity resilience are assessed and decisions made.

The UK Energy Research Centre welcomes this opportunity to provide input to the HMT Carbon Floor Price Consultation. We have focused only on the questions where we believe we may have something to offer. The observations have benefited from discussions at an “Independent Experts Workshop on Electricity Market Reform” convened jointly by UKERC and the Imperial Collage Centre for Energy Policy and Technology on 31 January 2011.

1. The transition to net-zero will affect the whole economy. Investment and policy decisions by all government departmentmes need to be compatible with this transition.
2. Policies to support renewable electricity generation should be more ambitious, building on deployment and cost reduction successes. Action is also needed to ensure electricity market rules are fit for a fully decarbonised power sector.
3. Decisions by the energy regulator, Ofgem, should also be compatible with net-zero. This includes enabling investment in local electricity networks to facilitate heat and transport decarbonisation, and ensuring more active use of existing networks.
4. Local energy systems could play a significant role in achieving net-zero, particularly in the integration of electricity, heat and transport. More resources and greater powers for Local Authorities will help to ensure the potential for local action is realised.
5. A clear plan is required for upgrading the UK housing stock. A heat and energy efficiency White Paper must include policies for widespread deployment of low carbon heat (including demonstrating hydrogen at scale) and for prioritising low income households.
6. Whilst the decarbonisation of industry is receiving more attention, policy initiatives are not joined up. Funding for specific projects and industrial clusters should be complemented by market creation policies, including for carbon capture and storage.
7. Our analysis shows that achieving net-zero requires the phase out of fossil-fuelled vehicles to be brought forward to 2030. Immediate action is also required to counter the rapid increase in sales of larger cars (including SUVs).
8. Plans to meet net-zero should maximise environmental co-benefits. Potential negative impacts on ecosystems should be assessed and mitigated.
9. Continuing uncertainty about the UK’s changing relationship with the European Union has already affected decarbonisation plans. Whatever the outcome, close co-operation with the EU is likely to make it easier to achieve net-zero.
10. The transition to net-zero should not compromise energy security. In light of the events on August 9th, responsibilities for ensuring system resilience need to be clarified and applied in a more rigorous way.

In this issue of UKERCs annual Review of Energy Policy, we discuss some of the effects of COVID-19 on the energy system and how the unprecedented events of 2020 might impact energy use and climate policy in the future.

Focusing on electricity demand, transport, green jobs and skills, Brexit, heat, and societal engagement, the Review reflects on the past year and looks forward, highlighting key priorities for the Government.

Key recommendations

Electricity

The scale of investment in the power system required over the coming decade is huge. A big challenge is market design. We need a market that can incentivise investment in low carbon power and networks at least cost whilst also providing incentives for flexibility. Output from wind and solar farms will sometimes exceed demand and other timesfallto low levels. The right mix of flexible resources must be established to deal with variable output from renewables, with the right market signals and interventions in place to do this at least cost.

Mobility

The end of the sale of fossil fuel cars and vans by 2030 must be greeted with enthusiasm. Yet if this is to play its part in a Paris-compliant pathway to zero emissions, it must be one of many policy changes to decarbonise UK transport. Earlier action is paramount, and we recommend a market transformation approach targeting the highest emitting vehicles now, not just from 2030. Phasing-in of the phase-out will save millions of tons of CO2 thus reducing the need for radical action later on. The forthcoming Transport Decarbonisation Plan has a lot to deliver.

Green jobs and skills

COVID-19 recoverypackages offer the potential to combine job creation with emissions reduction. A national housing retrofit programme would be a triple win, creating jobs, reducing carbon emissions and make our homes more comfortable and affordable to heat. However, UKERC research finds that there are significant skills gaps associated with energy efficient buildings and low carbon heat. UKERC calls for a national programme of retraining and reskilling that takes advantage of the COVID downturn to re-equip building service professions with the skills needed for net zero.

Brexit

As the UK leaves the EU on the 1st January it will lose many of the advantages of integration. With new regimes for carbon pricing, trading, and interconnection yet to be agreed, there will be a high degree of uncertainty in the near to medium term. Given upward pressure on energy costs,delays to policy, and this uncertainty surrounding new rules, the overall effects of Brexit are not positive for UK energy decarbonisation.

Heat

UKERC research calls for action on heat to deliver the net zero technologies that we know work - insulating buildings and rolling out proven options. We need to end delay or speculation about less-proven options. Analysis is consistent with recent advice from the CCC that heat policy should focus on electrification whilst exploring options for hydrogen. We need to break the pattern of ad hoc and disjointed policy measures for heat and buildings, and develop a coherent, long-term strategy. This would be best achieved as an integral part of local and regional energy plans, involving local governments as coordinating agents. The aspirations for heat cant be realised unless we also take actionon the skills gap.

Societal engagement with energy

Achieving net zero in 2050 will entail significant changes to the way we live, what we eat and how we heat our homes. The COVID-19 pandemic has shown that when faced with a threat, society can change rapidly. Engaging society with the net zero transition also needs to change, it needs to be to be more ambitious, diverse, joined-up and system-wide, and recognise the many different ways that citizens engage with these issues on an ongoing basis.

As we reach the end of 2018, the scorecard for UK energy policy is mixed. Optimists can point to rapid emissions reductions, cost falls in renewables and the centrality of clean energy within the Industrial Strategy. Ten years after the Climate Change Act was passed, UK greenhouse gas emissions have fallen by 43% from the level in 1990. The UK is on the way to meeting the first three carbon budgets, and a transformation of the power sector is well underway.

However, if we turn our attention from the rear view mirror, the outlook is more pessimistic. As the Committee on Climate Change pointed out in June, there are an increasing number of policy gaps and uncertainties. If not addressed promptly, meeting future carbon budgets will be much more challenging. For some of these gaps, there is a particularly clear and immediate economic case for action.

Key recommendations:

The government needs to take urgent action to ensure that the UK continues to meet statutory emissions reduction targets, and goes further to achieve net zero emissions. This not only requires new policies to fill looming gaps in the portfolio, it also requires much greater emphasis on sharing the benefits and costs of the low carbon transition more equitably. Our main recommendations are:

1. We repeat our call for a heat and energy efficiency White Paper, and recommend that the Industrial Strategy mission to reduce building energy use is extended to existing buildings.
2. A better, more targeted approach to the energy needs of low-income households is required. Energy efficiency investment for these households should be funded via general taxation.
3. Urgent large-scale trials of heat decarbonisation using hydrogen are required to understand whether it could be technically, economically and socially viable.
4. A dashboard of indicators is needed to monitor gas security during the energy transition. The current one dimensional approach is not sufficient.
5. Future electricity policy should build on the Electricity Market Reform policies that have worked well, and adapt them in the light of changes in technologies and costs.
6. Changes in incentives for ‘black start’ and other ancillary services are necessary to ensure that the electricity system remains resilient as it changes.
7. The target for phasing out conventionally fuelled vehicles is inadequate and does not fit with our emissions targets. The 2040 date should be brought forward and linked to accelerated investment in networks and charging.
8. The Industrial Strategy needs to be strongly linked to market creation policies for low carbon technologies. Carbon capture and storage is in particular need of such policies to progress beyond its current holding pattern.
9. To ensure widespread support for the energy transition, there needs to be more focus on equity and justice. The UK government should consider setting up a process similar to Scotland’s Just Transitions Commission to achieve this.
10. Continued vigilance is required to mitigate any negative impacts of Brexit, particularly those that could affect integration with European energy markets.

Energy System Demonstrators are physical demonstrations testing new technologies for low-carbon energy infrastructure.

A review of energy systems demonstrator projects in the UK was undertaken for UKERC by the Energy Systems Research Unit (ESRU) at the University of Strathclyde. The review encompassed 119 demonstrators and consisted of two phases: 1) the identification of demonstrator projects and 2) an analysis of projects and their outcomes.

Energy demonstrators

The review defined an energy system demonstrator as “the deployment and testing of more than one technology type that could underpin the operation of a low-carbon energy infrastructure in the future”. Only demonstrators that post-date the 2008 Climate Change Act were included and that included a physical demonstration at one or more UK sites. 119 projects were identified that met the search criteria.

There were two phases of review activity. Phase 1 involved identification and documentation of demonstration projects, involving a systematic search to identify and record the details of projects. Phase 2 was a review of project outcomes and outputs, particularly end-of-project evaluations, covering technical, economic and social outcomes where available.

The review outputs (available here) are a final report summarising the findings, 119 demonstrator project summaries (the Phase 1 reports), 119 demonstrator output analyses (the Phase 2 reports) and a GIS (Geographic Information System) map and database showing the locations and project details of the demonstrators.

The final report, attendant project summaries and GIS data are intended to provide policy makers and funding bodies with an overview of the existing demonstrator “landscape”, enabling decisions on future demonstrator calls and the focus of those calls to be made with a clearer knowledge of what has already been done.

Project files

• Access the demonstrators GIS map here.
• Access the Phase 1 summaries here.
• Access the Phase 2 summaries here. 

It argues that, since its emergence in the UK in the late 1990s, community energy has grown through finding opportunities for smaller scale, decentralised energy activities in the UKs highly centralised energy system. The combination of development of renewable energy technologies, and the launch of the governments Feed-In Tariff Scheme (FITS) in 2010, produced a boom in the sector, especially around solar electricity generation.

Recent cuts to FITS rates and other policy changes place community energy at a crossroads. Some renewables activity will continue, but groups are exploring a wide range of activities, partnerships, and business models. We are engaging with the sector around outputs from our research, which include a survey and case studies, to co-develop recommendations and pathways for the future.

Energy security is a central goal of energy policy in most countries and with rapid changes occurring throughout the UK energy sector, it remains high on the policy agenda. Recent concerns about UK gas supplies - highlighted by National Grid's gas deficit warning demonstrated just how fundamentally important it is to have a reliable energy system.

Using a number of indicators, ‘The Security of UK Energy Futures’ assesses aspects of security such as energy availability, reliability, sustainability and affordability to examine how energy security risks will change over time

The report draws three main conclusions:

1. There is an important role for energy efficiency and energy demand reduction in energy security strategies; by reducing our energy demand we reduce exposure to risks such as price shocks and energy shortages.
2. The relationship between decarbonisation and energy security is not straightforward. Energy imports are often cited as being insecure, however this can be controversial. Imports can help enhance security by providing additional sources of energy, by lowering costs, or by increasing diversity. What matters most is where the imports are from and whether they are dominated by risky sources or supply routes.
3. Many of the risks can be mitigated; security of the electricity and gas system can be improved significantly by investing in system flexibility. Increasing demand side response has a particularly positive impact on system reliability.

When the UKERC TPA team completed its first assessment of the evidence on the costs and impacts of intermittent generation on the British electricity system, the conclusion was that the additional costs would be relatively low, adding around 5-8 per MWh to the cost of the renewable electricity generated. This was based on a review of the available evidence, most of which did not envisage more than 20% of electricity to be sourced from intermittent renewables.

Since then, the UKs targets for renewable generation have been set considerably higher than this, and a number of significant new studies have been carried out into the likely effects of a much higher proportion of renewable electricity in the UK mix.

This project provides an update to the original 2006 UKERC report, reviewing the new evidence for the impacts associated with higher shares ofrenewable generation and

This UKERC Research Landscape provides an overview of the competencies and publicly funded activities in electric power conversion research, development and demonstration (RD&D) in the UK. It covers the main funding streams, research providers, infrastructure, networks and UK participation in international activities.

UKERC ENERGY RESEARCH LANDSCAPE: ELECTRIC POWER CONVERSION

• Section 1: An overview which includes a broad characterisation of research activity in the sector and the key research challenges
• Section 2: An assessment of UK capabilities in relation to wider international activities, in the context of market potential
• Section 3: Major funding streams and providers of basic research along with a brief commentary
• Section 4: Major funding streams and providers of applied research along with a brief commentary
• Section 5: Major funding streams for demonstration activity along with major projects and a brief commentary
• Section 6: Research infrastructure and other major research assets (e.g. databases, models)
• Section 7: Research networks, mainly in the UK, but also European networks not covered by the EU Framework Research and Technology Development (RTD) Programmes
• Section 8: UK participation in energy-related EU Framework Research and Technology Development (RTD) Programmes
• Section 9: UK participation in wider international initiatives, including those supported by the International Energy Agency

The UK power system experienced a period of significant and rapid expansion during the late 1980s and in the 1990s. Many power generation assets are now approaching the end of their useful life and need to be replaced as we decarbonise the overall energy system. Developments in distributed generation and other technologies open important questions as to whether the traditional approaches to development and operation of power systems are still adequate and whether the anticipated major re-investment in transmission and distribution networks could be avoided by adopting new technologies such as smart grids, smart meters and a greater emphasis on demand side participation.

High level research issues identified within the UKERC Energy Supply theme cover a number of areas, including:

• Aging infrastructure replacement strategies before failure - models and tools for condition monitoring - risk management of existing T&D infrastructure
• Energy security & system security
• Environmental sustainability reducing the impact of electricity production, transportation and use on the environment (strive to reduce greenhouse gases responsible for climate change) - need to incorporate climate change driven constraints into system planning and operation (EU renewables targets; 80% 2050 CO2 targets; Meeting UK carbon budgets will require large scale decarbonisation of the electricity sector by 2030)
• Integration of distributed generation including intermittent energy technologies & micro generation - what type of network architecture - reliability and power quality - communication and control aspects of networks - incorporation of demand response and demand side participation (impact of smart meters) - role of energy storage
• Incorporation of smart meters and smart grids (impact on demand and networks)
• Transmission (on- and offshore) and distribution network planning under uncertainty of intermittent renewable resources such as wind and the uncertainty of markets and regulatory policy
• Interaction between electricity and gas networks - Integrated network (multi energy vector) research and optimisation
• Encouraging network innovation and low carbon generation through regulation and market design
• Assessing the potential of heat networks
• Impact of greater European market/network integration (gas and electricity)

These projects are reviewed in this report and from these high level research issues, some of the key research challenges identified are summarised as follows:

• Identifying and quantifying the costsand benefits of community heating and energy systems
• Quantifying Costs and Benefits of Integrating UK and EU Energy Infrastructures
• Smart meters and demand side participation
• The role of gas in the UK energy system
• Resilience of gas systems
• Compatibility of energy market and climate objectives and risks in a post EMR world

UKERC endorses the principles underlying the proposed package of reforms and supports the broad direction and aspirations of the EMR. However we believe that the package is unnecessarily complex and that some important issues, such as governance arrangements and price transparency in wholesale markets have received insufficient attention, or are absent.

A system of feed-in tariffs differentiated by and tailored to specific technologies, coupled with a capacity mechanism, would be sufficient to deliver the twin goals of promoting investment in low carbon generation and ensuring security of supply.

The feed-in tariff (FiT) is the key element of the EMR package. However, a one size fits all approach to FiT design is not appropriate. Low carbon technologies are diverse in terms of technological maturity, cost structure and risk profiles and different technologies may merit different approaches.

We regret that fixed FiTs have been excluded as they are the lowest risk option and they have a proven track record globally in encouraging investment in renewables. Contracts for differences (CfDs) may be appropriate for nuclear, while biomass generation and CCS could be supported by premium FiTs. The Emission Performance Standard (EPS) appears to be the most dispensable part of the EMR packages since other measures, such as carbon price support, will effectively inhibit investment in new unabated coal in the UK.

A capacity mechanism will be needed to give assurance that sufficient capacity will be installed to guarantee security of supply though it may be some time before the mechanism is needed.

We would recommend approaching auctions for FiTs with caution as, for many technologies, the pre-conditions for a successfulauction are not in place. These include the need for established technologies, a vibrant, diversified and competitive market, and a well developed supply chain. Administered prices or beauty contest type tenders could be used initially with a move to auctioning at a later date.

The key risk associated with the proposed package is that its complexity and uncertainty surrounding its implementation could lead to an investment hiatus threatening the attainment of both low carbon generation and security of supply goals.

• There are extremely ambitious technology deployment rates (for example for CCGT, heat pumps and electric vehicles) within some scenarios that could be challenging in reality and should therefore be subjected to stress testing.
• In addition to the need for appropriate investment signals, analysis should address the incorporation of a very active demand side and if the current arrangements can handle large amounts of intermittent generation supplying an elastic demand side.
• UKERC recommends that Ofgem consider a stress test that examines the loss of Norwegian gas supplies.